Can factor proportions explain vertical intra-industry trade?

Abstract

Two questions in particular will be addressed. First, can earlier results for specific industries that suggest a positive relation between quality and capital-labour ratios of exporting countries be generalized to other industries? Second, what type of capital, physical or human, is most important in affecting the quality of vertically differentiated products? The results suggest that the relation between factor endowments and the quality of exported products is not just restricted to the product groups in previous analyses and that it is primarily human and not physical capital that determines the quality of production.